Markets too love World Cup wins
Has your portfolio taken a battering in the recent stock-market freefall? If so, pray for India. The Indian cricket team, that is.
If Team India wins the war in the Windies, it will be doing more than delighting cricket fans — it could be providing the strangest of triggers to activate the lacklustre stock market at home. Markets have historically reacted positively when the country they belong to have won a World Cup.
Though brokers are against such a correlation and say the market reaction is accidental, past trends and research reports tell a different story.
When Australia crushed India to lift the ICC World Cup on March 23, 2003, the benchmark index of the Australian Stock Exchange, the S&P ASX 200, firmed up by 5 per cent in the one-month period that followed. The index had similarly celebrated the Aussies’ Cup victory in 1999 by gaining 3.62 per cent in 30 days.
Soccer works even better. An ABN Amro report says a soccer Cup win adds 0.7 per cent to economic growth.
While a winning team brightens up the market prospects of its country, a losing team not only disappoints its citizens, but also investors.
Recent research by the Massachussets Institute of Technology shows that on the first trading day after a country’s team is eliminated from the World Cup soccer tournament, its national stock index on an average lags by about half a percentage point.
After Italy defeated France to lift the FIFA World Cup on June 9, 2006, the S&P MIB index of the Italian Stock Exchange, Borse Italia, jumped 332 points (0.7 per cent) in the one-month period that followed. Meanwhile, the benchmark index of Bourse De Paris, CAC 40, dropped 5 per cent in just one week.
So if Dravid lifts the Cup, he may also be lifting the markets.